Dairy farmers have been hammered by low milk prices much of the past four and a half years. But things are starting to look up. The Class III price, which was below $14 in January and February, improved to $15.04 in March and will end April near $15.95, according to Bob Cropp, University of Wisconsin-Extension dairy economist.

“Cheese prices should continue to improve, pushing the Class III price in the 16s as early as May, with a good possibility of reaching $17 by October,” Cropp says. “Class IV prices, which were $15.48 in January and improved to $15.80 in April, will be in the $16s by May and for the remainder of the year. Milk prices are shaping up to be much improved over the low milk prices in 2018.”

Cropp reports that the price for butter has held steady at $2.25 per pound but will rise by fall. He projects the nonfat dry milk price to hold steady at just under $1 per pound.

On April 24, the Chicago Mercantile Exchange reported 40-pound blocks were down a quarter of a cent to $1.67, while 500-pound barrels were up 2.5 cents to $1.60. In January, 40-pound blocks were averaging $1.40 per pound. April cheese prices were higher in 2019 than they were in 2018 and 2017.

The good news for dairy doesn’t end there. According to Cropp, U.S. milk production is declining.

“Milk production in March fell 0.4% below a year ago,” Cropp says. “This follows a 0.9% increase in milk production in January and just 0.1% more milk for February.”

Fewer cows

According to the USDA, milk cow numbers in the U.S. have been declining since June of last year. Cow numbers declined by 10,000 between February and March. There are 86,000, or 0.9%, fewer cows today than there were a year ago.

“This decline in cows numbers reflects cow slaughter running about 6% higher than a year ago and continued exiting of dairy producers,” Cropp says. “Milk per cows was just 0.5% higher than a year ago.”

With lower milk production, dairy product production is also lower. “Compared to a year ago, February butter production was 2.9% lower, cheddar cheese was 4.3% lower, and total cheese production was up just 0.5%,” he says. “Stock levels are also improving.”

Compared to March 31, 2018, butter stocks were down 1.4%, and American cheese stocks were up just 2.3%. Total cheese stocks were up 4.3%. Fluid milk sales declined 2% in 2018, and milk sales declined 1.2% through February of this year, according to USDA.

Shifting exports

Dairy exports have changed a lot since the trade war began last summer. Milk powder exports were down 78% to China, 11% to Southeast Asia, and 85% to the Middle East and North Africa. Whey exports dropped 58% to China and were the lowest since February 2011, Cropp notes.

But butterfat exports increased 34%, and cheese exports climbed 16% and fell just shy of the record high in March 2014. Cheese exports were up 71% to South Korea, 41% to Southeast Asia and 24% to Central America.

“After being 20% lower in January to Mexico, exports in February were up 9%,” Cropp says. On a total milk solids basis, February dairy exports were equivalent to 14.3% of U.S. milk production.